S&P review from firm

As seen in the attached research report the S&P 500 Index recently slammed into a convergence of resistance and a downtrend line. After needing a near 44 % rally from the lows just to trade up to the aforementioned resistance area it was hard to imagine the S&P 500 would just blast up though that level. Add to the mix that we recently entered a period that is historically weak for stocks and it makes sense why prices have corrected of late. As we have said a few times recently in other S&P 500 updates the index has most likely set its high point for a while and was likely at best to trade range bound or realistically lower for a while. We also suggested and continue to suggest that stops on remaining long holdings be adjusted/tightened and long exposure be reduced for the time being.



Since the dawn of the markets most if not all bottoming processes have had some sort of testing process after
setting an initial low. In 2002 for instance (our most recent low prior to March of 2008) the S&P 500 tested the
lows on 3 separate occasions (red arrows) before the final lows were ultimately set. So to expect this time things
would be different doesn’t make much sense.


There will be short-term trading opportunities that present themselves during the remainder of the
summer and into the fall however we don’t see any directional bull trend re-establishing itself before
some sort of retest sequence. The only thing that would change this outlook is a high volume move on
strong internals back above the recent highs.



posted by Peter Greene